Ave Maria Focused Fund Q2 2022 Commentary

Nando Vidal

For the quarter ended June 30, 2022, the total return of the Ave Maria Focused Fund (MUTF: AVEAX) was -22.43% against the S&P MidCap 400® Growth Index which returned -17.46% and the S&P 500® Index at -16.10% . The returns of the Ave Maria Focused Fund compared to its benchmark as of June 30, 2022 were:

Year at Date

1 year.

Since Creation^*

Prospectus Costs Report1

Ave Maria Targeted Fund

-33.40%

-27.19%

2.86%

1.12%

S&P MidCap 400® Growth index

-24.93%

-20.50%

13.58%

S&P500® Index

-19.96%

-10.62%

16.17%

^ Annualized * Since inception date is 05/01/2020

1The Advisor has contractually agreed to limit the ordinary operating expenses (excluding fees and expenses of the acquired fund, interest, taxes, brokerage fees and extraordinary expenses) of the Ave Maria Focused Fund to a amount not exceeding 1.25% of the average daily net assets of the fund until at least May 1, 2023.

The performance data quoted represents past performance, which does not guarantee future results. Investment return and principal value are historical and may fluctuate so the redemption value may be worth more or less than the original cost. Actual performance may be lower or higher than stated. Performance data reflects certain fee waivers and refunds. Without these derogations, performance would have been lower. Call 1-866-AVE-MARIA or visit www.avemariafunds.com for the most recent month-end performance.

During the first half of 2022, we saw the Federal Reserve withdraw liquidity from the economy via a combination of short-term interest rate hikes and quantitative tightening. This caused a massive sell-off in the markets. Companies with higher growth rates have been hardest hit. Selling occurred indiscriminately and large companies were sold with the market; the baby was thrown out with the bathwater, so to speak.

This setup is attractive as the Fund was able to deploy capital at attractive valuations throughout the first half of the year. The underlying companies are doing remarkably well and we are pleased with the outlook for the Fund’s holdings. Below is an analysis of some of the Fund’s top holdings, cumulatively representing over 45% of the Fund’s assets.

DigitalBridge Group, Inc. (DBRG)

DigitalBridge is a new holding company. The company is an asset manager that invests, through private equity funds, in digital infrastructure assets such as data centers, cell towers, small cells, fiber and edge facilities . DigitalBridge could benefit from several tailwinds, including the proliferation of data, which requires infrastructure to transmit, process and store. We took advantage of the recent downward pressure on the share price to add to the Fund’s position.

eDreams ODIGEO SA (OTC:EDDRF)

This European travel company has seen its stock hammered, producing a wide gap between the current price and our estimate of intrinsic value. Although the situation is frustrating, it is also an opportunity to buy more shares of a wonderful company at a bargain price.

GFL Environmental, Inc. (GFL)

GFL Environmental is a growing solid waste management company. In the first quarter of 2022, revenue increased by 11.3% organically and by 27.4% including acquisitions. At the company’s Investor Day in May, management provided increased free cash flow guidance for 2022, 2023 and 2024, which looks very positive.

Texas Pacific Land Corporation (TPL)

Texas Pacific Land Corporation is one of the largest landowners in Texas. The company’s internal operations are working well with WTI oil prices hovering around $100 a barrel. Additionally, high oil prices may encourage more drilling, which bodes well for TPL’s oil royalties, land easements and its fracking water business. Recently, TPL entered into a joint venture with a bitcoin miner to place bitcoin mining equipment on TPL land and use excess natural gas as a low-cost power source for the operation. Although we are skeptical about the future of bitcoin, we see this company as TPL getting a free option on the value of bitcoin.

Microsoft Corporation (MSFT)

Microsoft’s cloud business accounts for nearly half of the company’s revenue and Microsoft’s largest business, with Office 365 being the second largest. The cloud business helps customers save money, so it’s somewhat recession proof. Office 365 lets customers buy low annual subscriptions, instead of buying expensive license agreements every few years. This could keep revenues stable in a difficult economic environment. We believe the company will be able to sustain mid-teens revenue growth for the foreseeable future.

Brown-Forman Corp. – Class A (BF.A)

Brown-Forman is the maker of several spirits, including Jack Daniel’s Tennessee Whiskey, which is the only spirit brand in the world with an average price above $25.00 per bottle that sells over 10 million cases a year. Brown-Forman has several growth opportunities. Jack Daniels has a market share of around 35% in the developed world and only a share of around 10% in emerging markets. The company has launched several new products over the past five years that are gaining momentum. With global lockdowns ending, on-site sales growing and international travel resuming, the future looks bright for this iconic company.

Our confidence in the holdings of the Ave Maria Focused Fund comes from extensive research and our in-depth knowledge of the holdings and their prospects as businesses.

Thank you for your investment in the Ave Maria Targeted Fund.


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Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.

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